China and Russia squeeze out Western Oil Majors out of Iraq

By Rhod Mackenzie

The West Qurna 1 field is one of the largest in Iraq, with reserves estimated at over 20 billion barrels of oil. According to Oil Price (OP), the Chinese energy company PetroChina has taken over as the main operator of the project after US energy giant ExxonMobil withdrew from both this project and the Common Seawater Supply Project (CSSP). The change in operator is additional proof of China's increasing influence in the Middle East oil markets and the decline of Western companies' hegemony.

The transfer of control of Qurna 1 was officially announced last week. As for the actual situation, PetroChina has been unofficially in control of CSSP since June 2018, when ExxonMobil terminated negotiations with the Iraqi government and strategically decided to withdraw from the Middle Eastern country. Other Western energy companies also left, and were replaced by Chinese and Russian counterparts.
At a recent meeting with Iranian leadership, a senior Russian official stated that keeping the West out of energy deals in Iraq would be a decisive chapter in the eventual demise of Western hegemony.

The Qurna 1 field, which is located 65 km from Basra, contains approximately half of the proven oil reserves of the giant West Qurna field, estimated at 43 billion barrels. Initially, it was estimated that this section of the field held approximately 9 billion barrels. However, in early 2021, the Iraqi Ministry of Energy revised their calculations and determined that the Qurna 1 reserves actually exceed 20 billion barrels. As a result, Iraq has increased the design capacity of the first phase of field development from 500,000 barrels per day to 700,000 barrels per day. At present, the field produces 550,000 barrels per day. The Qurna 1 project is planned to reach full capacity of 2.825 million barrels per day in the early 30s.

China National Petroleum Corporation (CNPC) and ExxonMobil were the main operators of the project, each owning a 32.7% stake. Following the distribution of shares, CNPC transferred its shares to its subsidiary, PetroChina.

Baghdad hopes that the $53 billion CSSP project will help Iraq make a powerful leap in oil production from the current 4-4.5 million barrels per day, first to 7 million barrels per day, then 9, and in the future, it is possible, up to 12 million barrels per day and become the second largest oil-producing power on the planet after the United States. ExxonMobil became interested in this project immediately after its announcement in 2010. However, Americans quickly saw the many problems and risks in this very large energy project and their interest waned.

Negotiations between Exxon and Baghdad were interrupted several times and then resumed, but the Americans failed to reach an agreement with the Iraqi authorities. In the end, they decided to permanently withdraw not only from CSSP, but also to stop developing Qurna 1. On the first day of 2024, Exxon officially transferred its share to the Iraqi state oil company, Basra Oil Company (BOC). Initially, back in early 2021, the American giant tried to sell all its shares to PetroChina Co. and CNOOC Ltd., but Baghdad blocked that deal. In February last year, the Americans sold almost a third of their stake, 10% of the shares, to the Indonesian company Pertamina Internasional, which was already participating in the project with 10% of the shares. On January 1, 2024, BOS acquired 22.7% of the shares remaining with the American company. Thus, now in West Qurna 1 the participants, in addition to PetroChina (32.7%), Pertamina Internasional (20%), the Japanese energy company Itochu (19.6%) and the Iraqi companies BOC (22.7%) and Oil Exploration Co . (5%).